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Module 12: Job Classification & Merit Increase System

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Management Essentials for Daily Use and Ongoing Improvement

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Module 12: Job Classification & Merit Increase System

  1. 1. Work Focused Improvement® Management Essentials for Daily Use and Ongoing Improvement Module 12 of 44 Job Classification & Merit Increase Aligned Systems By Sam Pratt © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  2. 2. American Management’s Greatest Opportunity … is where they’ve missed the mark, and that’s with Pay Systems: 1. Frederick Taylor’s scientific approach to incentives has been attacked by those who see incentives as a cost and not an investment. 2. In the last 20 years many managers believed that “money doesn’t motivate” and sought to enrich each job with inherently interesting work. There is a solution: 1. Taylor’s scientific approach to incentives, with each human time studied as just another machine, does not work. Work Focused Improvement’s Socio-Technical design adjusts design factors according to the culture rating of the socio-technical work system. 2. Pay Systems must be designed so that if things stay the same, there is no bonus. 3. The notion that “money doesn’t motivate” springs from a corruption of Frederick Herzberg’s writings. There are many linear jobs (comprised of mostly repetitive tasks) that cannot be significantly enriched. 4. The number 1 motive for murder is money. Here is a point that has somehow been missed. If people are willing to kill for money and risk their lives, it is likely that they will work harder during their 8 hours at work for more money. 5. Even Millennials and X Y Generation People who sometimes adopt the Hollywood motto of “take this job and shove it” respond to properly designed Pay Systems. © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  3. 3. Role of Job Classification & Merit Increase Systems • All business mechanisms must work in concert • If the Incentive Systems reward for excellent performance that improves the bottom line, but the Suggestion Program rewards for ideas that do not advance performance, the inconsistent / bad message is working against the overall goal • Job Classification and Merit Increases must be aligned with all other business mechanisms © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  4. 4. Mission Objectives Goals Alignment Re-engineering Gain Share & Direct Incentive Mechanisms Merit Increase System Job Classification Continuous Improvement Work System Design Values Culture © 1986-2014 Samuel H. Pratt / SHP Consulting Limited Key Systems & Mechanisms
  5. 5. Perfect Alignment of Module Mechanisms Mission Objectives Goals Re-engineering Gain Share & Direct Incentives Mechanisms Merit Increase System Job Classification Continuous Improvement Work System Design Values Culture © 1986-2014 Samuel H. Pratt / SHP Consulting Limited Key Systems & Mechanisms
  6. 6. Job Classification & Merit Increase Opportunities  Job Classification objectives  Assure jobs are paid according to their worth as compared with others in company and the market  Provide a framework to control rates objectively over time  Merit Increase objectives  Optimize wage increases to reward performance and assure they are fair to the organization and fair to individuals  In mature organizations, correct the common problem of having little (if any) correlation between pay and performance in a given occupation © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  7. 7. Factors: 1. Pre Employment Education / Training 2. On the Job Experience 3. Complexity of Analysis 4. Mental effort 5. Seriousness of Error 6. Decision Making Responsibility 7. Interpersonal Skills 8. Organizational Knowledge 9. Inside / Outside Contacts 10. Risk Safety Factor 11. Independence of Action 12. Innovation Required 13. Overall Impact 14. Type of Supervision Example Communication for introducing the new system Using the final Job Classifications along with a Pay Scale Matrix permitted us to systematically determine where our wage rates should be for everyone in the Company. The Pay Scale Matrix reflects market changes that have occurred over the last two years. In reviewing each and every person, we considered. 1. The needs and competitive situation of the company 2. Fairness of implementing this Scale for each individual 3. These changes are individual, personal and confidential. © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  8. 8. Wage Scale with Adjustable Buttons $32.00 $30.00 =Calculation Easy Adjust Buttons $28.00 Inputs Increase per Job Class $ 0.34 Gap % for Lower to Upper Limit 136% Lowest Job Class 31 Lowest Wage Rate $ 8.75 Annual COL Adjustment 1.5% $26.00 $24.00 $22.00 Upper Limit Lower Limit $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 27 32 37 42 47 52 Job Class 57 62 67 72
  9. 9. © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  10. 10. Think in Thirds • It is useful to picture performance in thirds • The thirds relate to performance and value of the people – not literally the top 33.3% • It is also useful to think of the Groups as A, B, and C © 1986-2014 Samuel H. Pratt / SHP Consulting Limited A = Superior B = Good C = Struggling Merit Increases
  11. 11. Merit Increase Thoughts • Merit Increase Systems that essentially give everyone the same annual increase of 3% or 5%, or whatever, send the wrong message • People perform differently • For example, in the many organizations that have little correlation between pay and performance, give 0% increase to the bottom third, 4% to the middle third, and 8% to the top third • Over time, as the discrepancy is reduced and the bell curve of performance becomes tighter, the thirds can be 2.5%, 4% and 6.5% … for example. © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  12. 12. Aligned Core Worker Rating & Merit Increase System Personnel Rating Matrix Subjective / Objective Weight © 2004, 1986-2014 SHP Consulting Limited Job 1 Job 1 Job 2 Job 1 Job 1 Job 2 Job 1 Job 1 Job 1 Job 2 Job 2 Job 1 Job 1 Job 2 Job 2 Job 1 Job 1 Job 1 Job 1 Job 2 Job 1 Job 1 Merit % 6% 6% 6% 6% 6% 6% 6% 3% 3% 3% 3% 3% 3% 3% 0% 0% 0% 0% 0% 0% 0% 0% Throughput & Quality are entered as a copy and past (transposed) from 12 month averages. Impact as a Positive Force is entered below. Weighting of final scores is automatic. Using the automated color assignment below, determine the logical borders for the 3 groups ABC BCD CDF DEF EFG FGH GHI 20 Calc Direct Incentive Modifier (TP & Q) 8 Calc Impact as a Positive Force Calc Final Combined Score Performance Data Input Direct Incentive Modifier (Throughput and Quality) Calc Direct Incentive Score Calc Impact as a Positive Force Calc Score (Average, Leveled Calc Score (Total, Differentiated) Scoring 5 Excellent 4 Good 3 Average 2 Below Average 1 Unsatisfactory Input Input Input Input Input Input Calc Step 4: Final Merit Increase Percent 88.0 29.3 86.0 25.3 80.0 24.0 72.0 24.0 70.0 24.0 66.0 24.0 64.0 24.0 HIJ 62.0 24.0 IJK JKL 62.0 24.0 58.0 24.0 KLM LMN MNO NOP OPQ PQR QRS RST STU TUV UVW VWX 52.0 22.7 52.0 24.0 46.0 24.0 44.0 24.0 38.0 24.0 34.0 24.0 34.0 24.0 30.0 24.0 28.0 24.0 28.0 24.0 26.0 22.7 22.0 17.3 117.3 111.3 104.0 96.0 94.0 90.0 88.0 86.0 86.0 82.0 74.7 76.0 70.0 68.0 62.0 58.0 58.0 54.0 52.0 52.0 48.7 39.3 158.6% 157.0% 150.6% 144.4% 141.5% 137.6% 136.2% 134.1% 134.0% 131.1% 125.9% 125.3% 120.6% 118.3% 113.7% 110.3% 109.3% 106.9% 105.1% 104.3% 103.3% 94.1% 4.4 4.3 4.0 3.6 3.5 3.3 3.2 3.1 3.1 2.9 2.6 2.6 2.3 Step 3: Final Combined Score 2.2 1.9 1.7 1.7 1.5 1.4 1.4 1.3 1.1 3.7 3.2 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.8 3.0 Once calculated and sorted by score, conditional 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.8 2.2 4.0 3.7 3.5 3.3 3.3 3.2 3.1 3.1 3.1 3.0 2.7 2.8 formatting assigns 2.5 to each perosn. 2.3 2.7 2.6 2.4 2.4 2.2 2.2 2.1 1.6 color Step6.6 Direct Incentive Modifier 6.1 5.9 5.4 5.6 5.3 5.2 4.9 4.7 4.7 4.5 4.4 4.4 4.1 3.3 1: 6.5 6.3 6.2 6.1 8.1 7.5 7.0 This score, which is Throughput + Quality, is the totally objective yearly average. As such, it is highly weighted. Impact as a Positive Force includes: Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Score Leads by Example 5 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 3 3 3 2 Step 2:3 Impact as a3Positive Force 4 3 3 5 3 3 3 5 3 3 3 3 4 3 Shares knowledge and helps other people improve 3 4 3 3 2 3 Takes action to improve the work system 3 3 4 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 These 64 scores3 are defaulted3to 3 (Average)3and can Cooperates with all levels of organization 4 3 adjusted up3 or down. As a generally subjective 3 3 3 3 3 3 3 2 3 3 3 3 2 3 3 3 3 2 3 be Step 5: 3Calculating New Wage Rate 3 2 1 Is promotable 4 3 3 3 3 2 3 3 1 3 3 2 3 3 3 Factor,2it has a low weighting3 value.4 Follows company rules and procedures 3 3 3 3 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 This is automatically done using linked3 Merit 4 Increase above. Average 3.7 3.2 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.8 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.8 2.2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2013 Wage Rate $14.96 $16.80 $15.32 $14.15 $17.00 $18.55 $13.88 $14.51 $14.68 $19.99 $15.55 $17.33 $14.92 $18.17 $14.33 $16.22 $16.22 $16.87 $14.99 $15.82 $20.38 $17.61 2014 Wage Rate $15.86 $17.81 $16.24 $15.00 $18.02 $19.66 $14.71 $14.95 $15.12 $20.59 $16.02 $17.85 $15.37 $18.72 $14.33 $16.22 $16.22 $16.87 $14.99 $15.82 $20.38 $17.61 Lower Job Class Limit $14.11 $14.11 $14.46 $14.11 $14.11 $14.46 $14.11 $14.11 $14.11 $14.46 $14.46 $14.11 $14.11 $14.46 $14.46 $14.11 $14.11 $14.11 $14.11 $14.46 $14.11 $14.11 Upper Job Class Limit $19.19 $19.19 $19.67 $19.19 $19.19 $19.67 $19.19 $19.19 $19.19 $19.67 $19.67 $19.19 $19.19 $19.67 $19.67 $19.19 $19.19 $19.19 $19.19 $19.67 $19.19 $19.19
  13. 13. The preceding slide (Core Worker Rating & Merit Increase system) has a section which automatically calculates the new wage rate The following slide is then automatically generated and is very helpful in verifying that the outcome is fair to individuals and fair to the organization … and strongly aligned with the objectives of a Performance Organization
  14. 14. Master List of People, Jobs, Job Rates, Job Ranges Note on the following Slide 1. This Master List when coupled to related graphs is useful for identifying needs and issues with jobs and wages 2. It is both a tool and a report 3. It is especially useful when designing Wage Policy, rules, and budgets © 1986-2014 Samuel H. Pratt / SHP Consulting Limited
  15. 15. Supvr Accounts 39.6 Process Team Lead 38.1 Process Team Lead 38.1 Data Specialist 37.2 Parts Team Lead 36.8 Compliance Analyst 35.7 Compliance Analyst 35.7 IT Specialist 35.5 IT Specialist 35.5 Accounts Technician 35.2 Service Liaison 35.0 Marketing Liaison 35.0 Quality Analyst 34.2 Accounting Specialist 33.6 KPI Specialist 33.2 KPI Specialist 33.2 Flow Analyst 33.1 Info System Specialist 32.7 Info System Specialist 32.7 Service Engineer 32.6 Service Engineer 32.6 Service Engineer 32.6 Sales Engineer 32.3 Product Team Lead Product Team Lead JC Job Index No Job Title Total Master Summary Jobs, Wage Rates & Employees Group Wage Rate Lower Limit Upper Limit Low, OK, High (logic formula) 40 Acc 38 Prc $15.72 $ 14.50 $ 20.88 $15.77 $ 14.00 $ 20.16 38 Prc 37 Acc $15.77 $ 14.00 $ 20.16 $18.41 $ 13.75 $ 19.80 37 Ser 36 Qua $14.71 $ 13.75 $ 19.80 $16.77 $ 13.50 $ 19.44 36 Qua 36 ITS $19.08 $ 13.50 $ 19.44 $19.52 $ 13.50 $ 19.44 36 ITS 35 Acc $19.98 $ 13.50 $ 19.44 $18.74 $ 13.25 $ 19.08 35 Ser 35 Mkt $13.57 $ 13.25 $ 19.08 $18.04 $ 13.25 $ 19.08 34 Qua 34 Acc $15.99 $ 13.00 $ 18.72 $20.24 $ 13.00 $ 18.72 33 Acc 33 Prc $16.91 $ 12.75 $ 18.36 $15.20 $ 12.75 $ 18.36 33 Prc 33 ITS $12.85 $ 12.75 $ 18.36 $16.35 $ 12.75 $ 18.36 33 ITS 33 Ser $13.87 $ 12.75 $ 18.36 $15.01 $ 12.75 $ 18.36 33 Ser 33 Ser $19.47 $ 12.75 $ 18.36 $16.89 $ 12.75 $ 18.36 $16.32 $ 12.50 $ 18.00 32.1 32 Mkt 32 Prc $12.37 $ 12.50 $ 18.00 Low 32.1 32 Prc $12.79 $ 12.50 $ 18.00 OK OK OK OK OK OK OK © 1986-2014 Samuel H. Pratt / SHP Consulting Limited 18 are Low 173 are OK 40 are High 231 Total High High OK OK OK OK High OK OK OK OK OK OK High OK OK OK Wage Rates
  16. 16. Objectives of Job Classification 1. Objectively determine value of each job 2. Group jobs in a way that optimizes flexibility, costs, and employee retention 3. Provide graphics that clearly communicate the system and wage analysis process 4. Develop charts and matrices that facilitate creation of Wage Administration Rules and Guidelines 5. Use Wage Ranges & Occupational Rates (Incentive Baselines) in a way that produces the best overall outcome
  17. 17. Wage Administration Rules & Guidelines 1. 2. 3. 4. 5. 6. Red Circled Employees (above Upper Limit) can receive up to an average increase if performance is in top 1/3 of occupation Red circle employees can receive Cost of Living increase if performance is in middle 1/3 of occupation Employees below Lower Limit and on the job for over 1 year can receive raises up to COL if performance is in lower 1/3 of occupation & above 100% for Direct Incentive Annual raises for Jobs with purely objective performance criteria can be apportioned into thirds with different wage increase percents for each group: 6% 3% 0% for example Occupational Wage Rates (incentive base rates) will be linked to the Lower Level of the wage range and adjusted annually along with Cost of Living. Over time, an outcome of the process will be that employees are below the upper limit of their job and that there will be a strong correlation between Pay &Performance

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